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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

—————————

FORM 10-Q

—————————

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ____ to ____

Commission File Number: 001-36027

MIX TELEMATICS LIMITED

(Exact name of Registrant as specified in its charter)

Republic of South Africa

Not Applicable

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

750 Park of Commerce Blvd

Suite 310

Boca Raton

Florida

33487

(Address of principal executive offices)

(Zip Code)

(877)

585-1088

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares, each representing
25 Ordinary Shares, no par value

MIXT

New York Stock Exchange

Ordinary Shares, no par value

New York Stock Exchange (for listing purposes only)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 26, 2024, the registrant had 554,020,612 ordinary shares of no par value, outstanding. This number excludes 53,816,750 shares held by the registrant as treasury stock.

TABLE OF CONTENTS


						Page

Part I - FINANCIAL INFORMATION						3
Item 1. Financial Statements						3
Condensed Consolidated Balance Sheets (unaudited)						3
Condensed Consolidated Statements of Income (unaudited)						4
Condensed Consolidated Statements of Comprehensive Income/(Loss) (unaudited)						5
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)						6
Condensed Consolidated Statements of Cash Flows (unaudited)						8
Notes to Condensed Consolidated Financial Statements (unaudited)						10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						27
Item 3. Quantitative and Qualitative Disclosures About Market Risk						51
Item 4. Controls and Procedures						52
Part II - OTHER INFORMATION
Item 1. Legal Proceedings						53
Item 1A. Risk Factors						54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						55
Item 5. Other Information						55
Item 6. Exhibits						56
Signatures						57

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	March 31, 2023		December 31, 2023 (Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	29,876	$	25,419
Restricted cash	781		863
Accounts receivables, net of allowances for doubtful accounts of $2.7 million and $3.7 million as of March 31, 2023 and December 31, 2023, respectively	24,194		28,264
Inventory, net	4,936		5,137
Prepaid expenses and other current assets	9,950		9,470
Total current assets	69,737		69,153

Property, plant and equipment, net	36,779		40,865
Goodwill	39,258		39,060
Intangible assets, net	21,895		21,247
Deferred tax assets	2,090		583
Other assets	6,804		10,614

Total assets	$	176,563	$	181,522
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	15,253	$	21,136
Accounts payables	6,120		4,897
Accrued expenses and other liabilities	21,486		23,614
Contingent consideration	3,569		312
Deferred revenue	5,295		6,487
Income taxes payable	298		288
Total current liabilities	52,021		56,734

Deferred tax liabilities	12,357		13,506

Long-term accrued expenses and other liabilities	3,368		3,265



Total liabilities	67,746		73,505

Stockholders’ equity:
MiX Telematics Limited stockholders’ equity
Preference shares: 100 million shares authorized but not issued	—		—
Ordinary shares: 608.8 million and 607.8 million no-par value shares issued as of March 31, 2023 and December 31, 2023, respectively	64,001		63,455

Less treasury stock at cost: 53.8 million shares as of March 31, 2023 and December 31, 2023	(17,315)		(17,315)
Retained earnings	79,024		78,334
Accumulated other comprehensive loss	(13,399)		(13,790)

Additional paid-in capital	(3,499)		(2,672)
Total MiX Telematics Limited stockholders’ equity	108,812		108,012
Non-controlling interest	5		5
Total stockholders’ equity	108,817		108,017

Total liabilities and stockholders’ equity	$	176,563	$	181,522

The accompanying notes are an integral part of these condensed consolidated financial statements.

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Revenue
Subscription	$	32,469	$	33,655	$	94,132	$	98,303
Hardware and other	5,338		5,430		13,996		14,895
Total revenue	37,807		39,085		108,128		113,198
Cost of revenue
Subscription	9,864		11,942		29,769		33,373
Hardware and other	3,595		3,645		10,176		9,938
Total cost of revenue	13,459		15,587		39,945		43,311
Gross profit	24,348		23,498		68,183		69,887

Operating expenses
Sales and marketing	4,589		3,537		12,974		10,512

Administration and other	15,728		17,507		47,275		50,052
Total operating expenses	20,317		21,044		60,249		60,564
Income from operations	4,031		2,454		7,934		9,323
Other (expense)/income	(748)		66		859		(234)
Interest income	106		307		994		774
Interest expense	378		604		1,002		1,645
Income before income tax expense	3,011		2,223		8,785		8,218
Income tax expense	223		762		6,525		4,900
Net income	2,788		1,461		2,260		3,318
Less: Net income attributable to non-controlling interest	—		—		—		—
Net income attributable to MiX Telematics Limited	$	2,788	$	1,461	$	2,260	$	3,318

Net income per ordinary share
Basic	$	0.005	$	0.003	$	0.004	$	0.006
Diluted	$	0.005	$	0.003	$	0.004	$	0.006

Net income per American Depositary Share
Basic	$	0.13	$	0.07	$	0.10	$	0.15
Diluted	$	0.13	$	0.07	$	0.10	$	0.15

Ordinary shares
Weighted average	552,865		554,021		552,148		554,086
Diluted weighted average	555,811		554,021		556,047		554,294

American Depositary Shares
Weighted average	22,115		22,161		22,086		22,163
Diluted weighted average	22,232		22,161		22,242		22,172

The accompanying notes are an integral part of these condensed consolidated financial statements.

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Net income	$	2,788	$	1,461	$	2,260	$	3,318
Other comprehensive income/(loss)
Foreign currency translation gains/(losses), net of tax	5,166		3,018		(13,443)		(391)

Total comprehensive income/(loss)	7,954		4,479		(11,183)		2,927
Less: Total comprehensive income attributable to non-controlling interest	—		—		—		—
Total comprehensive income/(loss) attributable to MiX Telematics Limited	$	7,954	$	4,479	$	(11,183)	$	2,927

The accompanying notes are an integral part of these condensed consolidated financial statements.

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Three Months Ended December 31, 2022 and 2023
	Common Stock			Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Additional Paid-In Capital		Retained Earnings		Total MiX Telematics Limited Stockholders’ Equity		Non-Controlling Interest		Total Stockholder’s Equity
	Shares	Amount
Balance as of October 1, 2022	605,903	$	64,283	$	(17,315)	$	(14,700)	$	(3,950)	$	76,469	$	104,787	$	5	$	104,792



Net income	—	—		—		—		—		2,788		2,788		—		2,788
Other comprehensive income	—	—		—		5,166		—		—		5,166		—		5,166


Issuance of common stock in relation to SARs exercised	1,238	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		273		—		273		—		273

Dividends of 4 South African cents (0.2 U.S. cents) per ordinary share declared	—	—		—		—		—		(1,250)		(1,250)		—		(1,250)



Balance as of December 31, 2022	607,141	$	64,283	$	(17,315)	$	(9,534)	$	(3,677)	$	78,007	$	111,764	$	5	$	111,769

Balance as of October 1, 2023	607,838	$	63,455	$	(17,315)	$	(16,808)	$	(2,934)	$	78,203	$	104,601	$	5	$	104,606
Net income	—	—		—		—		—		1,461		1,461		—		1,461
Other comprehensive income	—	—		—		3,018		—		—		3,018		—		3,018

Stock-based compensation	—	—		—		—		262		—		262		—		262
Dividends of 4.5 South African cents (0.2 U.S cents) per ordinary share declared	—	—		—		—		—		(1,330)		(1,330)		—		(1,330)


Balance as of December 31, 2023	607,838	$	63,455	$	(17,315)	$	(13,790)	$	(2,672)	$	78,334	$	108,012	$	5	$	108,017

The accompanying notes are an integral part of these condensed consolidated financial statements.

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Nine Months Ended December 31, 2022 and 2023
	Common Stock			Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Additional Paid-In Capital		Retained Earnings		Total MiX Telematics Limited Stockholders’ Equity		Non-Controlling Interest		Total Stockholder’s Equity
	Shares	Amount
Balance as of April 1, 2022	605,177	$	64,390	$	(17,315)	$	3,909	$	(4,001)	$	79,709	$	126,692	$	5	$	126,697



Net income	—	—		—		—		—		2,260		2,260		—		2,260
Other comprehensive loss	—	—		—		(13,443)		—		—		(13,443)		—		(13,443)


Issuance of common stock in relation to SARs and RSUs exercised	2,292	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		324		—		324		—		324

Dividends declared	—	—		—		—		—		(3,962)		(3,962)		—		(3,962)
Ordinary shares repurchased and cancelled	(328)	(107)		—		—		—		—		(107)		—		(107)


Balance as of December 31, 2022	607,141	$	64,283	$	(17,315)	$	(9,534)	$	(3,677)	$	78,007	$	111,764	$	5	$	111,769

Balance as of April 1, 2023	608,754	$	64,001	$	(17,315)	$	(13,399)	$	(3,499)	$	79,024	$	108,812	$	5	$	108,817
Net income	—	—		—		—		—		3,318		3,318		—		3,318
Other comprehensive loss	—	—		—		(391)		—		—		(391)		—		(391)
Issuance of common stock in relation to RSUs exercised	800	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		827		—		827		—		827
Dividends declared	—	—		—		—		—		(4,008)		(4,008)		—		(4,008)
Ordinary shares repurchased and cancelled	(1,716)	(546)		—		—		—		—		(546)		—		(546)

Balance as of December 31, 2023	607,838	$	63,455	$	(17,315)	$	(13,790)	$	(2,672)	$	78,334	$	108,012	$	5	$	108,017

The accompanying notes are an integral part of these condensed consolidated financial statements.

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended December 31,
	2022		2023
Cash flows from operating activities
Net income	$	2,260	$	3,318
Adjustments to reconcile net income to net cash provided by operating activities:
Current income taxes	2,154		2,006
Deferred income taxes	4,371		2,894
Profit on sale of property, plant and equipment	(32)		(49)
Contingent consideration remeasurement	—		(1,049)
Depreciation	7,216		9,404
Amortization of intangible assets	3,992		4,620
Amortization of deferred commissions	3,017		3,819

Net interest expense	8		871
Stock based compensation costs	324		827
Net foreign exchange (gains)/losses	(743)		1,346
Change in allowance for doubtful accounts	2,872		3,561
Write-down of inventory to net realizable value	434		323
Net accrued expenses and other liabilities raised	580		(272)
Other non-cash items	(468)		(262)
Changes in operating assets and liabilities:
Inventories	(2,073)		(524)
Accounts receivables	(4,848)		(7,631)
Prepaid expenses and other current assets	(60)		(495)
Accounts payables	(3,183)		(1,591)
Accrued expenses and other liabilities	3,579		2,943
Deferred commissions	(4,973)		(6,763)
Foreign currency translation adjustments on operating assets and liabilities	(876)		(1,637)

Interest received	590		697
Interest paid	(601)		(1,252)
Income tax paid	(745)		(1,587)
Net cash provided by operating activities	12,795		13,517

Cash flows from investing activities
Acquisition of property, plant and equipment – in-vehicle devices	(14,521)		(12,140)
Acquisition of property, plant and equipment – other	(788)		(701)
Proceeds from the sale of property, plant and equipment	71		65
Acquisition of intangible assets	(4,086)		(4,254)
Cash paid for business combination	(3,739)		—
Deferred consideration paid	—		(1,414)

Net cash used in investing activities	(23,063)		(18,444)

Cash flows from financing activities

Cash paid for ordinary shares repurchased	(107)		(546)
Cash paid on dividends to MiX Telematics Limited stockholders	(3,955)		(4,002)
Movement in short-term debt	7,562		5,946
Net cash from financing activities	3,500		1,398



Net decrease in cash and cash equivalents, and restricted cash	(6,768)		(3,529)
Cash and cash equivalents, and restricted cash at beginning of the period	34,719		30,657
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(2,142)		(846)
Cash and cash equivalents, and restricted cash at end of the period	$	25,809	$	26,282

The accompanying notes are an integral part of these condensed consolidated financial statements.

MIX TELEMATICS LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization and Summary of Significant Accounting Policies

Nature of the Business

MiX Telematics Limited and its subsidiaries (“the Company”) is a global provider of fleet and mobile asset management solutions delivered as Software-as-a-Service (“SaaS”). The Company’s solutions enable customers to manage, optimize and protect their investments in commercial fleets, mobile assets or personal vehicles. The Company’s solutions enable a wide range of customers, from large enterprise fleets to small fleet operators and consumers, to reduce fuel and other operating costs, improve efficiency, enhance regulatory compliance, promote driver safety, manage risk and mitigate theft.

The Company is incorporated and domiciled in South Africa, with its principal executive office in Boca Raton, Florida. The Company’s fiscal year ends on March 31.

Basis of preparation and consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, which are necessary for a fair statement of the results of the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 filed with the SEC on June 22, 2023.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported and disclosed. Significant estimates include, but are not limited to, fair value measurement of contingent consideration, allowances for doubtful accounts, the assessment of expected cash flows used in evaluating goodwill for impairment and income and deferred taxes. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

We have considered the impact of rising inflation, fuel prices, global politics, sanctions and the impact thereof on global trade on the estimates and assumptions used. As of December 31, 2023, we have taken into account the impact of the above on goodwill sensitivities and impairment assessments. However, future changes in economic conditions could have an impact on future estimates and judgements used.

Summary of significant accounting policies

There have been no changes to the Company’s significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023, filed with the SEC on June 22, 2023, that have had a material impact on the Company’s Condensed Consolidated Financial Statements and related notes.

Recently Adopted Accounting Pronouncements

There were no new accounting pronouncements adopted during the nine months ended December 31, 2023.

Recent Accounting Pronouncements Not Yet Adopted

On October 28, 2021, the FASB issued ASU 2021-08, which amends ASC 805, Business Combinations, to require companies to apply ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. This creates an exception to the general recognition and measurement principle in ASC 805 which requires an acquirer to generally recognize such items at fair value on the acquisition date. The ASU is effective for fiscal years beginning after December 15, 2022 and interim periods therein for public business entities (PBEs). For all other entities, it is effective for fiscal years beginning after December 15, 2023 and interim periods therein. Early adoption is permitted for all entities, including adoption in an interim period. The adoption of the ASU is expected to have no material impact.

2. Acquisition

MiX Telematics North America, a 100% owned subsidiary of the Company, acquired Trimble Inc.’s Field Service Management business (“FSM”) in North America on September 2, 2022 (the “FSM Acquisition”).

FSM’s North American operations include the sale and support of telemetry and video solutions that enable back-office monitoring and visualization for fleet services management in a number of industries.

All existing FSM subscription contracts and the related revenue streams were acquired by MiX Telematics North America. The initial accounting for the business combination was complete at March 31, 2023. For additional information on the acquisition please refer to our Annual Report on Form 10-K for the year ended March 31, 2023, which we filed with the SEC on June 22, 2023.

3. Revenue from contracts with customers

The Company provides fleet and mobile asset management solutions. The principal revenue streams are (1) Subscription and (2) Hardware and other. Subscription revenue is recognized over time and hardware and other revenue is recognized at a point-in-time.

To provide services to customers, a device is required which collects and transmits information collected from the vehicle or other asset. Fleet customers may also obtain other items of hardware, virtually all of which are functionally dependent on the device. Some customers obtain control of the device and other hardware (where legal title transfers to the customer); while other customers do not (where legal title remains with the Company). A contract arises on the acceptance of a customer’s purchase order, which is typically executed in writing.

Contract liabilities

When customers are invoiced in advance for subscription services that will be provided over periods of more than one month, or pay in advance of service periods of more than one month, deferred revenue liabilities are recorded. Deferred revenue as of March 31, 2023 and December 31, 2023 was $5.3 million and $6.5 million, respectively. During the quarters ended December 31, 2022 and December 31, 2023, revenue of $1.2 million and $0.8 million, respectively, which was included in the deferred revenue balances at the beginning of each such quarter, was recognized. During the nine months ended December 31, 2022 and December 31, 2023, revenue of $3.4 million and $2.9 million, respectively, which was included in the deferred revenue balances at the beginning of each such financial year, was recognized.

Contract acquisition costs

Commissions payable to sales employees and external third parties which are incurred to acquire contracts are capitalized and amortized, unless the amortization period is 12 months or less, in which instance they are expensed immediately. Deferred commissions were $6.0 million and $9.4 million as of March 31, 2023 and December 31, 2023, respectively, and are included in Other assets on the Condensed Consolidated Balance Sheets.

The following is a summary of the amortization expense recognized (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Amortization recognized during the period:	$	(1,088)	$	(1,464)	$	(3,017)	$	(3,819)
–Cost of revenue (external commissions)	(868)		(1,215)		(2,340)		(3,153)
–Sales and marketing (internal commissions)	(220)		(249)		(677)		(666)

4. Credit risk related to accounts receivable

The movements in the allowance for doubtful accounts are as follows (in thousands):


	Nine Months Ended December 31,
	2022		2023
Balance at April 1	$	5,426	$	2,745



Bad debt provision	2,872		3,561
Write-offs	(4,326)		(2,638)

Foreign currency translation differences	(636)		(11)
Balance at December 31	$	3,336	$	3,657

Overview of the Company’s exposure to credit risk from customers

The maximum exposure to credit risk at the reporting date is the gross carrying value of each receivable and loan to external parties. As of March 31, 2023 and December 31, 2023, the Company had no significant concentration of credit risk, due to its spread of customers across various operations and geographical locations.

The Company does not hold any collateral as security.

5. Inventory

Inventory, which comprises of components and finished goods, is stated at the lower of cost and net realizable value. Cost is determined using a first-in, first-out, actual cost or weighted average cost basis.

Inventory comprises of the following (in thousands):


	March 31, 2023		December 31, 2023
Components	$	3,131	$	1,510
Finished goods	3,146		4,804
Total inventory	6,277		6,314
Less: Accumulated write-down to net realizable value	(1,341)		(1,177)
Inventory, net	$	4,936	$	5,137

6. Prepaid expenses and other current assets

Prepaid expenses and other current assets comprise of the following (in thousands):


	March 31, 2023		December 31, 2023
Pre-payments	$	2,742	$	3,678
Prepaid taxes	95		136
Indemnification asset	474		—
Current income tax asset	1,496		936
VAT receivable	1,362		1,203
Sundry debtors	3,378		3,129
Deposits	131		134
Staff receivable	91		172
Lease receivable	171		52
Interest receivable	10		30
	$	9,950	$	9,470

7. Property, plant and equipment

Property, plant and equipment comprises owned and right of use assets. The Company leases many assets including property, motor vehicles and office equipment.

The cost and accumulated depreciation of owned assets are as follows (in thousands):


	March 31, 2023		December 31, 2023
Owned assets

Plant and Equipment	$	793	$	845
Motor Vehicles	1,948		1,888
Furniture, fixtures and equipment	1,295		1,175
Computer and radio equipment	3,743		4,088
In-vehicle devices	72,405		82,687
Assets in progress	26		34
Owned assets, gross	80,210		90,717
Less: accumulated depreciation and impairments	(46,932)		(53,232)
Owned assets, net	$	33,278	$	37,485

Depreciation expense related to owned assets during the three months ended December 31, 2022 and 2023 was $2.4 million and $3.6 million, respectively. Depreciation expense related to owned assets during the nine months ended December 31, 2022 and 2023 was $7.2 million and $9.4 million, respectively. Depreciation expense related to in-vehicle devices is included in subscription cost of revenue.

The cost and accumulated depreciation of right-of-use assets are as follows (in thousands):


	March 31, 2023		December 31, 2023
Right-of-use assets
Property	$	5,792	$	5,193
Equipment, motor vehicles and other	259		306


Less: accumulated depreciation	(2,550)		(2,119)
Right of use assets, net	$	3,501	$	3,380

8. Intangible assets

Intangible assets comprise the following (in thousands):


		As of March 31, 2023						As of December 31, 2023
	Useful life (in years)	Gross Carrying amount		Accumulated amortization		Net		Gross Carrying amount		Accumulated amortization		Net
Patents and trademarks	3 - 10	$	90	$	(63)	$	27	$	121	$	(95)	$	26
Customer relationships	1 - 10	8,234		(3,061)		5,173		8,316		(4,008)		4,308
Internal-use software, technology and other	1 - 20	39,031		(22,336)		16,695		41,127		(24,214)		16,913
Total		$	47,355	$	(25,460)	$	21,895	$	49,564	$	(28,317)	$	21,247

For the three months ended December 31, 2022 and 2023, amortization expense of $1.6 million has been recognized in both periods. For the nine months ended December 31, 2022 and 2023, amortization expense of $4.0 million, and $4.6 million, respectively, has been recognized. Non-cash disposals of $0.6 million and $2.0 million were recognized for the nine months ended December 31, 2022 and 2023, respectively. Foreign exchange related gains of $2.9 million and foreign exchange related

losses $0.3 million, on accumulated amortization, were recognized for the nine months ended December 31, 2022 and 2023, respectively.

9. Accrued expenses and other liabilities

Accrued expenses and other liabilities comprise the following (in thousands):


	March 31, 2023		December 31, 2023
Current:
Product warranties	$	317	$	320
Maintenance	430		339
Employee-related accruals	3,392		3,997
Bonus and incentives	3,344		2,738
Lease liabilities	688		868

Accrued commissions	3,675		5,023
Loss contingency (1)	474		—
Value added tax payables	1,239		1,371
Post-acquisition support and hardware payable (1)	2,265		1,729
Other accruals	5,662		7,229
Total current	$	21,486	$	23,614


Non-current:
Lease liabilities	$	2,966	$	2,803
Other liabilities	402		462
Total non-current	$	3,368	$	3,265

(1) Relates to the FSM Acquisition.

Product warranties

The Company provides warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily. Management estimates the related provision for future warranty claims based on historical warranty claim information, the product lifetime, as well as recent trends that might suggest that past cost information may differ from future claims. The table below provides details of the movement in the accrual (in thousands):


	As of December 31,
	2022		2023
Product warranties
Opening balance	$	683	$	359
Warranty credit	(44)		(11)
Reclassification (1)	265		—

Acquisition (2)	41		—
Foreign currency translation difference	(86)		1
Balance as of December 31	$	329	$	349
Non-current portion (included in other liabilities)	$	42	$	29
Current portion	$	287	$	320

(1) Relates to a reclassification of certain costs from Product warranties to the Maintenance provision during fiscal year 2023.
(2) Relates to the FSM Acquisition.

10. Development expenditure

Development expenditure incurred comprises the following (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Costs capitalized (1)	$	905	$	1,144	$	2,934	$	3,662
Costs expensed (2)	1,358		1,424		4,362		4,403
Total costs incurred	$	2,263	$	2,568	$	7,296	$	8,065


(1) Costs capitalized relate only to the development of internal-use software, which are recognized in accordance with the Intangible assets (Internal-use software and technology) accounting policy.
(2) Costs expensed are included in Administration and other expenses in the Condensed Consolidated Statements of Income.

11. Leases

The Company leases property, office equipment and vehicles under operating leases. The lease terms vary between 1 month and 120 months, with many leases providing renewal rights and certain leases with annual escalations of up to 8% per annum. To the extent the Company is reasonably certain that it will exercise renewal options, such options have been included in the lease terms used for calculating the right-of-use assets and lease liabilities. Right-of-use assets are included in Property, plant and equipment in the Condensed Consolidated Balance Sheets and lease liabilities related to the Company’s operating leases are included in Accrued expenses and other liabilities and Long-term accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

Where lease terms are 12-months or less, and meet the criteria for short-term lease classification, no right-of-use asset and no lease liability are recognized.

The components of lease cost are as follows (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023

Operating lease cost	$	297	$	286	$	932	$	889
Short-term lease cost	104		156		236		368
Total lease cost	$	401	$	442	$	1,168	$	1,257

Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):


	Nine Months Ended December 31,
	2022		2023

Operating cash flow information:
Cash payments included in the measurement of lease liabilities	$	1,069	$	775
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	868	$	600

Weighted-average remaining lease term and discount rate for our operating leases are as follows:


	March 31, 2023		December 31, 2023
Weighted-average remaining lease term - operating leases (months) (1)	22		19
Weighted-average discount rate - operating leases	8.0	%	8.4	%

(1) Including expected renewals where appropriate.

Maturities of operating lease liabilities as of December 31, 2023 were as follows (in thousands):


2024 (remainder)	$	288
2025	1,064
2026	860
2027	727
2028	684
Thereafter	828
Total future minimum lease payments	4,451
Less: Imputed interest	(780)
Present value of future minimum lease payments	3,671
Less: Current portion of lease liabilities	(868)
Non-current portion of lease liabilities	$	2,803

12. Income taxes

Our income tax provision reflects our estimate of the effective tax rate expected to be applicable for the full fiscal year, adjusted for any discrete events which are recorded in the period they occur. The estimates are re-evaluated each quarter based on our estimated tax expense for the full fiscal year.

Our effective tax rate was 74.3% for the nine months ended December 31, 2022 compared to 59.6% for the nine months ended December 31, 2023. Our effective tax rate was 7.4% for the three months ended December 31, 2022 compared to 34.3% for the three months ended December 31, 2023.

13. Earnings per share

Basic

Basic earnings per share is calculated by dividing the income attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares in issue during the period.

The net income and weighted average number of shares used in the calculation of basic and diluted earnings per share are as follows (in thousands, except per share data):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Ordinary shares:
Numerator (basic)
Net income attributable to MiX Telematics Limited stockholders	$	2,788	$	1,461	$	2,260	$	3,318
Denominator (basic)
Weighted-average number of ordinary shares in issue and outstanding	552,865		554,021		552,148		554,086
Basic earnings per share	$	0.005	$	0.003	$	0.004	$	0.006



American Depositary Shares*:
Numerator (basic)
Net income attributable to MiX Telematics Limited stockholders	$	2,788	$	1,461	$	2,260	$	3,318
Denominator (basic)
Weighted-average number of American Depositary Shares in issue and outstanding	22,115		22,161		22,086		22,163
Basic earnings per American Depositary Share	$	0.13	$	0.07	$	0.10	$	0.15

*One American Depositary Share is the equivalent of 25 ordinary shares.

Diluted

Diluted earnings per share is calculated by dividing the diluted income attributable to ordinary shareholders by the diluted weighted average number of ordinary shares in issue during the period. Restricted share units and stock appreciation rights granted to directors and employees are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share if the required target share price or annual shareholder return hurdles (as applicable) would have been met based on the performance up to the reporting date, and to the extent to which they are dilutive.


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Ordinary shares:
Numerator (diluted)
Diluted net income attributable to MiX Telematics Limited stockholders	$	2,788	$	1,461	$	2,260	$	3,318
Denominator (diluted)
Weighted-average number of ordinary shares in issue and outstanding	552,865		554,021		552,148		554,086
Adjusted for:
– potentially dilutive effect of stock appreciation rights	2,249		—		2,873		—
– potentially dilutive effect of restricted share units	697		—		1,026		208

Diluted-weighted average number of ordinary shares in issue and outstanding	555,811		554,021		556,047		554,294
Diluted earnings per share	$	0.005	$	0.003	$	0.004	$	0.006



American Depositary Shares*:
Numerator (diluted)
Diluted net income attributable to MiX Telematics Limited stockholders	$	2,788	$	1,461	$	2,260	$	3,318
Denominator (diluted)
Weighted-average number of American Depositary Shares in issue and outstanding	22,115		22,161		22,086		22,163
Adjusted for:
– potentially dilutive effect of stock appreciation rights	90		—		115		—
– potentially dilutive effect of restricted share units	27		—		41		9
Diluted weighted-average number of American Depositary Shares in issue and outstanding	22,232		22,161		22,242		22,172
Diluted earnings per American Depositary Share	$	0.13	$	0.07	$	0.10	$	0.15



*One American Depositary Share is the equivalent of 25 ordinary shares.

14. Segment information

The Company has six reportable segments, which are based on the geographical location of the five Regional Sales Offices (“RSOs”) and also includes the Central Services Organization (“CSO”). The RSOs provide fleet and mobile asset management solutions and predominantly generate external revenue. CSO is the central services organization that wholesales products and services to RSOs who, in turn, interface with our end-customers, distributors and dealers. CSO is also responsible for the development of hardware and software platforms and provides common marketing, product management, technical and distribution support to each of the other reportable segments. CSO is a reportable segment because it produces discrete financial information which is reviewed by the chief operating decision maker (“CODM”) and has the ability to generate external revenue.

The CODM has been identified as the Chief Executive Officer who makes strategic decisions for the Company. The performance of the reportable segments has been measured and evaluated by the CODM using Segment Adjusted EBITDA, which is a measure that uses income before income tax expense excluding the contingent consideration remeasurement, non-recurring transitional service agreement costs, strategic costs, acquisition-related costs, interest expense, interest income, net foreign exchange losses/gains, net loss/profit on sale of property, plant and equipment, restructuring costs, stock-based compensation costs, depreciation, amortization, onerous contract costs, operating lease costs and corporate and consolidation

entries. Product development costs are capitalized and amortized and this amortization is excluded from Segment Adjusted EBITDA.

Segment assets are not disclosed because such information is not reviewed by the CODM.

The following tables provide revenue and Segment Adjusted EBITDA (in thousands):


	Three Months Ended December 31, 2022
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	18,029	$	1,460	$	19,489	$	8,121
Europe	3,051		748		3,799		1,402
Americas	5,842		308		6,150		1,378
Middle East and Australasia	4,013		2,382		6,395		2,308
Brazil	1,516		440		1,956		614
Total Regional Sales Offices	32,451		5,338		37,789		13,823
Central Services Organization	18		—		18		(2,570)
Total Segment Results	$	32,469	$	5,338	$	37,807	$	11,253

1.Subscription revenue is recognized over time.

2.Hardware and other revenue is recognized at a point in time.


	Three Months Ended December 31, 2023
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	19,408	$	1,512	$	20,920	$	8,869
Europe	3,014		368		3,382		1,113
Americas	5,062		561		5,623		1,321
Middle East and Australasia	4,361		2,318		6,679		2,802
Brazil	1,805		671		2,476		782
Total Regional Sales Offices	33,650		5,430		39,080		14,887
Central Services Organization	5		—		5		(2,504)
Total Segment Results	$	33,655	$	5,430	$	39,085	$	12,383

1.Subscription revenue is recognized over time.

2.Hardware and other revenue is recognized at a point in time.



	Nine Months Ended December 31, 2022
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	55,163	$	4,545	$	59,708	$	23,586
Europe	9,215		1,747		10,962		3,737
Americas	13,535		1,471		15,006		2,496
Middle East and Australasia	12,095		5,156		17,251		6,295
Brazil	4,065		1,077		5,142		1,457
Total Regional Sales Offices	94,073		13,996		108,069		37,571
Central Services Organization	59		—		59		(8,029)
Total Segment Results	$	94,132	$	13,996	$	108,128	$	29,542

1.Subscription revenue is recognized over time.

2.Hardware and other revenue is recognized at a point in time.



	Nine Months Ended December 31, 2023
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	56,606	$	3,997	$	60,603	$	26,016
Europe	9,184		1,377		10,561		3,639
Americas	14,503		1,286		15,789		2,403
Middle East and Australasia	12,757		6,441		19,198		8,338
Brazil	5,237		1,790		7,027		2,629
Total Regional Sales Offices	98,287		14,891		113,178		43,025
Central Services Organization	16		4		20		(7,321)
Total Segment Results	$	98,303	$	14,895	$	113,198	$	35,704

1.Subscription revenue is recognized over time.

2.Hardware and other revenue is recognized at a point in time.

A reconciliation of the segment results to income before income tax expense is disclosed below (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
Segment Adjusted EBITDA	$	11,253	$	12,383	$	29,542	$	35,704
Corporate and consolidation entries	(2,267)		(2,267)		(7,219)		(7,179)
Operating lease costs (1)	(298)		(285)		(933)		(888)
Product development costs (2)	(280)		(293)		(972)		(976)
Onerous contract costs	—		(4)		—		35
Depreciation and amortization	(4,012)		(5,254)		(11,208)		(14,024)

Stock-based compensation costs	(273)		(262)		(324)		(827)
Restructuring costs	(84)		—		(84)		(30)
Net (loss)/profit on sale of property, plant and equipment	(1)		45		32		49
Net foreign exchange (losses)/gains	(755)		(493)		743		(1,346)
Interest income	106		307		994		774
Interest expense	(378)		(604)		(1,002)		(1,645)
Acquisition-related costs	—		—		(784)		—
Strategic costs (3)	—		(1,200)		—		(1,996)
Non-recurring transitional service agreement costs (4)	—		(361)		—		(482)
Contingent consideration remeasurement	—		511		—		1,049
Income before income tax expense	$	3,011	$	2,223	$	8,785	$	8,218

1.For the purposes of calculating Segment Adjusted EBITDA, operating lease expenses are excluded from the Segment Adjusted EBITDA. Therefore, in order to reconcile Segment Adjusted EBITDA to income before income tax expense, the total lease expense in respect of operating leases needs to be deducted.
2.For segment reporting purposes, product development costs, which do not meet the capitalization requirements under ASC 730 Research and Development or under ASC 985 Software, are capitalized and amortized. The amortization is excluded from Segment Adjusted EBITDA. In order to reconcile Segment Adjusted EBITDA to income before income tax expense, product development costs capitalized for segment reporting purposes need to be deducted.
3.Strategic costs relate to costs incurred in relation to the Powerfleet Transaction discussed in note 18 to the condensed consolidated financial statements.
4.Certain non-recurring costs related to the extension of the transitional service agreement in respect of the FSM business acquired from Trimble in September 2022 were incurred on a temporary basis from September 2023 to December 2023 and have been excluded from Adjusted EBITDA.

No single customer accounted for 10% or more of the Company’s total revenue for the three months ended December 31, 2022 and 2023. No single customer accounted for 10% or more of the Company’s accounts receivable as of March 31, 2023 or December 31, 2023.

15. Stock-based compensation plan

The Company has issued equity-classified share incentives under the MiX Telematics Long-Term Incentive Plan (“LTIP”) to directors and certain key employees within the Company.

The LTIP provides for three types of grants to be issued, namely performance shares, restricted share units (“RSUs”) and stock appreciation rights (“SARs”).

As of December 31, 2023, there were 12,790,000 shares reserved for future issuance under the LTIP.

The total stock-based compensation expense recognized during the three months ended December 31, 2022 and 2023 was $0.3 million in each period. The total stock-based compensation expense recognized during the nine months ended December 31, 2022 and 2023 was $0.3 million and $0.8 million, respectively.

Stock appreciation rights granted under the LTIP

The following table summarizes the activities for the outstanding SARs:


	Number of SARs	Weighted- Average Exercise Price in U.S. Cents*	Weighted Average Contractual Remaining Term (years)	Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 2023	35,800,000	37
Granted	10,600,000	27
Exercised	—	—

Forfeited	(1,425,000)	32
Outstanding as of December 31, 2023	44,975,000	34	3.83

Vested and expected to vest as of December 31, 2023	42,726,250	34	3.83	$	—
Vested as of December 31, 2023	—	—	—	$	—

As of December 31, 2023, there was $2.1 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 3.72 years.

*U.S. currency amounts are based on a ZAR:USD exchange rate of 18.2982 as of December 31, 2023.

Restricted share units granted under the LTIP

0.8 million RSUs were outstanding and unvested as of April 1, 2023. 0.8 million RSUs vested and were settled during the first quarter of fiscal year 2024. There were no outstanding RSUs as at the end of the first, second and third quarters of fiscal year 2024.

The following table summarizes the Company’s unvested RSUs for the nine months ended December 31, 2023:


	Number of RSUs	Weighted- Average Grant-Date Fair Value in U.S. Cents*
Unvested as of April 1, 2023	800,000	31


Settled	(800,000)	31

Unvested as of December 31, 2023	—	—

* The exercise price used to determine the grant date fair value is denominated in South African cents. U.S. currency amounts are based on a ZAR:USD exchange rate of 18.2982 as of December 31, 2023.

16. Debt

As of March 31, 2023 debt comprised bank overdrafts of $15.3 million. As of December 31, 2023 debt comprised $20.5 million of bank overdrafts and $0.6 million of book overdrafts, respectively.

Details of undrawn facilities are shown below:


	Interest rate	March 31, 2023		December 31, 2023
Undrawn borrowing facilities at floating rates include:
– Standard Bank:
CFC Overdraft	SA Prime* less 1.2%	$	1,180	$	1,798
Overdraft	SA Prime* less 1.2%	—		—
Vehicle and asset finance	SA Prime* less 1.2%	—		—
Working capital facility	SA Prime* less 0.25%	—		—
– Nedbank Limited overdraft	SA Prime* less 2%	264		547
– Investec Bank Limited Facility:
General committed banking facility	SA Prime* less 1.5%	7,222		656
General uncommitted banking facility	Negotiable (overnight or daily rates)	10,000		10,000

		$	18,666	$	13,001

*South African prime interest rate

As of March 31, 2023 and December 31, 2023, the South African prime interest rate was 11.25% and 11.75% respectively. The Standard Bank and Nedbank Limited (“Nedbank”) facilities have no fixed renewal date and are repayable on demand. The facility from Nedbank is unsecured.

The Investec Bank Limited (“Investec”) credit facilities are comprised of a 364-day renewable committed general credit facility of R350 million (the equivalent of $19.1 million as of December 31, 2023) (the “Committed Facility”) and an uncommitted general credit facility of $10 million (the “Uncommitted Facility”). As of December 31, 2023, $18.5 million of the Committed Facility was utilized.

Under the Committed Facility, the Company will pay a commitment fee charged at 30bps on any undrawn portion of the Committed Facility (plus VAT on such amount), calculated monthly and payable, free of deduction, monthly in arrears on the first business day of each month. The Uncommitted Facility is repayable on demand by Investec and a fee of 10bps per annum shall be charged on any undrawn portion of the Uncommitted Facility (plus VAT on such amount), calculated monthly and payable, free of deduction, monthly in arrears on the seventh business day of each month.

The loans under the Committed Facility bear interest at South African prime interest rate less 1.5% per annum and the loans under the Uncommitted Facility bear interest at overnight or daily negotiable rates, in each case which such interest shall accrue on all amounts outstanding under the Committed Facility or the Uncommitted Facility, as the case may be, payable monthly in arrears on the first business day of each month, or as otherwise specified in the Credit Agreement. Investec shall advise the Company of any changes to the applicable interest rate.

On November 15, 2022, the Company concluded a second amendment to the credit agreement with Standard Bank, which entitles the Company to utilize a maximum amount of R70.0 million (the equivalent of $3.8 million as of December 31, 2023), in the form of a customer foreign currency account overdraft facility (the “CFC Overdraft Facility”). All other facilities under the facility letter with Standard Bank were replaced by the CFC Overdraft Facility. The CFC Overdraft Facility has no fixed renewal date and is repayable on demand. The CFC Overdraft Facility bears interest at the South African Prime interest rate less 1.2% per annum. As of December 31, 2023, $2.0 million of the CFC Overdraft Facility was utilized.

In November 2022, the Company also terminated the suretyship securing the Company’s indebtedness (among other parties) to Standard Bank and signed by the Company and its subsidiaries; MiX Telematics Africa Proprietary Limited (“MiX Telematics Africa”) and MiX Telematics International Proprietary Limited (“MiX Telematics International”). A new suretyship agreement was entered into providing that the Company and only one subsidiary being MiX Telematics International, binds themselves as

surety(ies) and co-principal debtor(s) for the payment, when due, of all the present and future debts of any kind of the Company and MiX Telematics International to Standard Bank. The security release letter also provided that Standard Bank’s claims to any security furnished by the Company and its subsidiaries under the original suretyship agreement were released upon signature of the new suretyship agreement.

On December 19, 2023, Powerfleet and the Company entered into a commitment letter with Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”), pursuant to which RMB has committed to provide two senior secured term loan facilities to Powerfleet and Powerfleet Sub in an aggregate principal amount of up to $85 million (comprised of two facilities in the aggregate principal amount of up to the ZAR equivalent of $50 million and $35 million, respectively (the “Term A facility” and “Term B facility,” respectively, and, collectively, the “term facilities”)) and a general banking facility to Powerfleet Sub in an aggregate principal amount of up to R350 million (the “general facility” and, together with the term facilities, the “credit facilities”). The term facilities will be available to Powerfleet for the purpose of redeeming the Series A preferred stock in full in cash, and the general facility will be available to fund the ongoing activity and capital expenditures of Powerfleet Sub. The credit facilities are subject to customary closing conditions.

17. Contingencies

Service agreement

In terms of an amended network services agreement with Mobile Telephone Networks Proprietary Limited (“MTN”), MTN is entitled to claw back payments from MiX Telematics Africa, a subsidiary of the Company, in the event of early cancellation of the agreement or certain base connections not being maintained over the term of the agreement. No connection incentives will be received in terms of the amended network services agreement. The maximum potential liability under the arrangement as of March 31, 2023 and December 31, 2023 was $1.1 million and $0.9 million, respectively. No loss is considered probable under this arrangement.

Competition Commission of South Africa matter

On April 15, 2019 the Competition Commission of South Africa (“Commission”) referred a matter to the Competition Tribunal of South Africa (“Tribunal”). The Commission contends that the Company and a number of its channel partners have engaged in market division. Should the Tribunal rule against MiX Telematics, the Company may be liable for an administrative penalty in terms of the Competition Act, No. 89 of 1998. The Company cooperated fully with the Commission during its preliminary investigation.

The Tribunal has since set the matter for hearing from June 24 to July 2, 2024. Leading up to that date various intermediary steps such as discovery, filing of witness statements and trial bundle exchanges will take place.

We cannot predict the timing of a resolution or the ultimate outcome of the matter. However, the Company and its external legal advisers continue to believe that we have consistently adhered to all applicable laws and regulations and that the referral from the Commission is without merit. As of December 31, 2023, no intermediary steps have taken place, and we have not made any provisions for this matter as an estimate of the possible loss or range of loss could not be made, and we do not believe that an outflow of economic resources is probable.

18. Subsequent events

Other than the items below, the directors are not aware of any matter material or otherwise arising since December 31, 2023 and up to the date of this report, not otherwise dealt with herein.

Dividend declared

The Board of Directors declared, in respect of the three months ended December 31, 2023, a dividend of 4.50000 South African cents per ordinary share and 1.12500 South African Rand per American Depositary Share (“ADS”), which will be paid on March 7, 2024 to ADS holders on record as of the close of business on February 23, 2024.

Business combination

As previously disclosed in a Current Report on Form 8-K on October 10, 2023, the Company entered into an agreement (the “Agreement”) with PowerFleet, Inc. (“Powerfleet”) and Main Street 2000 Proprietary Limited, a wholly owned subsidiary of Powerfleet (“Powerfleet Sub”), whereby Powerfleet Sub will acquire all of the issued ordinary shares of the Company, including the ordinary shares represented by the Company’s ADSs, through the implementation of a scheme of arrangement (the “Scheme”) in accordance with Sections 114 and 115 of the South African Companies Act, No. 71 of 2008. As a result of

the transactions, including the Scheme, contemplated by the Agreement (collectively, the “Powerfleet Transaction”), the Company will become an indirect, wholly owned subsidiary of Powerfleet, the Company’s ordinary shares will be delisted from the Johannesburg Stock Exchange and the Company’s ADSs will be delisted from the New York Stock Exchange.

As announced on January 30, 2024, the Company distributed a circular in respect of the Scheme (the “Scheme Circular”), together with a South African prospectus of Powerfleet in respect of the secondary inward listing of Powerfleet on the JSE, to the Company’s shareholders. The Scheme Circular incorporates a notice of scheme meeting convened for the purposes of approving the resolutions required to implement the Scheme, and will be held at 2:30 p.m. (South African Time) on Wednesday, February 28, 2024, for the purpose of considering and, if deemed fit, passing with or without modification the resolutions required to be approved by the Company’s shareholders in order to authorize and implement the Scheme. In connection with the Powerfleet Transaction, Powerfleet has filed, and the SEC declared effective on January 24, 2024, a Registration Statement on Form S-4, which includes a joint proxy statement of the Company and Powerfleet and a U.S. prospectus of Powerfleet. The Company and Powerfleet commenced the mailing of the joint proxy statement/U.S. prospectus on January 29, 2024.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements regarding our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements include, but are not limited to, the Company’s beliefs, plans, goals, objectives, expectations, assumptions, estimates, intentions, future performance, other statements that are not historical facts and statements identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates” or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in, or suggested by, these forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved.

Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of known and unknown risks and uncertainties, some of which are beyond our control. We believe that these risks and uncertainties include, but are not limited to, those described in the section entitled “Risk Factors” and forward-looking statements in the Company’s most recent Annual Report on Form 10-K and, with respect to the proposed transaction with PowerFleet, Inc. (“Powerfleet”), the Registration Statement on Form S-4, which includes a joint proxy statement of the Company and Powerfleet and a U.S. prospectus of Powerfleet, filed by Powerfleet and declared effective by the U.S. Securities and Exchange Commission on January 24, 2024. These risk factors should not be considered as an exhaustive list and should be read in conjunction with the other cautionary statements and information in this report.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof and we assume no obligation to update any forward-looking statements contained herein and expressly disclaim any obligation to do so, whether as a result of new information, future events or otherwise, except as required by law.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q.

This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our future results may vary materially from those indicated as a result of the risks that affect our business, including, among others, those identified in “Forward-Looking Statements” and Part II “Item 1A. Risk Factors”.

Overview

We are a leading global provider of fleet and mobile asset management solutions delivered as Software-as-as-Service (“SaaS”). Our solutions deliver a measurable return by enabling our customers to manage, optimize and protect their investments in commercial fleets or personal vehicles. We generate actionable insights that enable a wide range of customers, from large enterprise fleets to small fleet operators and consumers, to reduce fuel and other operating costs, improve efficiency, enhance regulatory compliance, enhance driver safety, manage risk and mitigate theft. Our solutions mostly rely on our proprietary, highly scalable technology platforms, which allow us to collect, analyze and deliver information based on data from our customers’ vehicles. Using an intuitive, web-based interface, dashboards or mobile applications, our fleet customers can access large volumes of real-time and historical data, monitor the location and status of their drivers and vehicles and analyze a wide number of key metrics across their fleet operations.

We were founded in 1996 and we have offices in South Africa, the United Kingdom, the United States, Uganda, Brazil, Australia, Romania, United Arab Emirates, Mexico and India as well as a network of more than 130 fleet value-added resellers worldwide. MiX Telematics’ ordinary shares are publicly traded on the Johannesburg Stock Exchange (JSE: MIX) and MiX Telematics’ American Depositary Shares (“ADS”) are listed on the New York Stock Exchange (NYSE: MIXT).

We derive the majority of our revenue from subscriptions to our fleet and mobile asset management solutions. Our subscriptions generally include access to our SaaS solutions, connectivity, and in many cases, use of an in-vehicle device. We also generate revenue from the sale of in-vehicle devices, which enable customers to use our subscription-based solutions, installation services of our in-vehicle-devices and driver training for fleet customers. We generate sales through the efforts of our direct sales teams, staffed in our regional sales offices, and through our global network of distributors and dealers. Our direct sales teams focus on marketing our fleet solutions to global and multinational enterprise accounts and to other customer accounts located in regions of the world where we maintain a direct sales presence. Our direct sales teams have industry expertise across multiple industries, including oil and gas, transportation and logistics, government and municipal, bus and coach, rental and leasing, and utilities. In some markets, we rely on a network of distributors and dealers to sell our solutions on our behalf. Our distributors and dealers also install our in-vehicle devices and provide training, technical support and ongoing maintenance for the customers they support.

Recent Developments

As previously reported in a Current Report on Form 8-K on October 10, 2023, we entered into an Implementation Agreement (the “Agreement”), by and among us, PowerFleet, Inc., a Delaware corporation (“Powerfleet”), and Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and a wholly owned subsidiary of Powerfleet (“Powerfleet Sub”), pursuant to which, subject to the terms and conditions thereof, Powerfleet Sub will acquire all of our issued ordinary shares, including the ordinary shares represented by our ADSs, through the implementation of a scheme of arrangement (the “Scheme”) in accordance with Sections 114 and 115 of the South African Companies Act, No. 71 of 2008, in exchange for shares of common stock, par value $0.01 per share, of Powerfleet (the “Powerfleet Common Stock”). As a result of the transactions, including the Scheme, contemplated by the Agreement (the “Powerfleet Transaction”), we will become an indirect, wholly owned subsidiary of Powerfleet.

The implementation of the Scheme will result in the delisting of our ordinary shares from the Johannesburg Stock Exchange (the “JSE”) and the delisting of our ADSs from the New York Stock Exchange. The Powerfleet Common Stock will continue to be listed on The Nasdaq Global Market and will additionally be listed on the JSE by way of a secondary inward listing.

As previously reported in a Current Report on Form 8-K on January 30, 2024, we have distributed a circular in respect of the Scheme (the “Scheme Circular”), together with a South African prospectus of Powerfleet in respect of the secondary inward listing of Powerfleet on the JSE, to our shareholders. The Scheme Circular incorporates a notice of scheme meeting convened for the purposes of approving the resolutions required to implement the Scheme, and will be held at 2:30 p.m. (South African Time) on Wednesday, February 28, 2024, for the purpose of considering and, if deemed fit, passing with or without modification the resolutions required to be approved by our shareholders in order to authorize and implement the Scheme. In connection with the Powerfleet Transaction, Powerfleet has filed, and the U.S. Securities and Exchange Commission (the “SEC”) declared effective on January 24, 2024, a Registration Statement on Form S-4, which includes a joint proxy statement of the Company and Powerfleet and a U.S. prospectus of Powerfleet. The Company and Powerfleet commenced the mailing of the joint proxy statement/U.S. prospectus on January 29, 2024.

The Powerfleet Transaction is expected to close in the first half of calendar year 2024, subject to satisfaction of customary closing conditions including, but not limited to, approval from our shareholders and approval from Powerfleet’s stockholders.

Inflation Risk

We believe that inflation may have a material effect on our business, financial condition or results of operations in the current fiscal year. Current economic projections remain uncertain as a result of the sudden and sharp surge in global inflation mainly as a result of global supply chain constraints, rising energy and commodity prices, global politics, fiscal and monetary policies and the impact thereof on global trade. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset these higher costs through price increases. Our inability to do so could harm our business, financial condition and results of operations. Refer to Part II Item 1A. “Risk Factors” for further information regarding inflation risk.

Key Financial Measures and Operating Metrics

In addition to financial measures based on our consolidated financial statements, we monitor our business operations using various financial and non-financial metrics.

Subscription Revenue

Subscription revenue represents subscription fees for our solutions, which include the use of our SaaS fleet management solutions, connectivity, and in many cases, our in-vehicle devices. Our subscription revenue is driven primarily by the number of subscribers and the monthly price per subscriber, which varies depending on the services and features customers require, hardware options, customer size and geographic location.

In the three months ended December 31, 2022 and 2023, subscription revenue increased as a percentage of total revenue due to a decrease in hardware and other revenues. In the three months ended December 31, 2022 and 2023, subscription revenue represented 85.9% and 86.1%, respectively, of our total revenue. In the nine months ended December 31, 2022 and 2023, subscription revenue represented 87.1% and 86.8%, respectively, of our total revenue.

Subscribers

Subscribers represent the total number of discrete services we provide to customers at the end of the period.


	As of December 31,
	2022	2023
Subscribers	959,212	1,142,135

During the third quarter of fiscal year 2024, our subscriber base increased by a net 52,400 subscribers, compared to the net growth of 44,600 subscribers during the third quarter of fiscal year 2023. The growth during the third quarter of fiscal year 2024 was mainly due to asset tracking and light fleet subscribers in the Africa segment.

Basis of Presentation and Key Components of Our Results of Operations

We manage our business in six segments which include Africa, Americas, Brazil, Europe and the Middle East and Australasia (our regional sales offices (“RSOs”)), and our central services organization (“CSO”). CSO is the central services organization that wholesales products and services to RSOs which, in turn, interface with our end-customers, distributors and dealers. CSO is also responsible for the development of hardware and software platforms and provides common marketing, product management, technical and distribution support to each of the other reportable segments. CSO is a reportable segment because it produces discrete financial information which is reviewed by the chief operating decision maker (“CODM”) and has the ability to generate external revenue.

The CODM has been identified as the Chief Executive Officer who makes strategic decisions. The performance of the reportable segments has been measured and evaluated by the CODM using Segment Adjusted EBITDA, which is a measure that uses income before income tax expense excluding the contingent consideration remeasurement, non-recurring transitional service agreement costs, strategic costs, acquisition-related costs, interest expense, interest income, net foreign exchange losses/gains, net loss/profit on sale of property, plant and equipment, restructuring costs, stock-based compensation costs, depreciation, amortization, onerous contract costs, operating lease costs and corporate and consolidation entries. Product development costs are capitalized and amortized, and this amortization is excluded from Segment Adjusted EBITDA.

In determining Segment Adjusted EBITDA, the margin generated by CSO, net of any unrealized intercompany profit, is allocated to the geographic region where the external revenue is recorded by our RSOs. The costs remaining in CSO relate mainly to research and development of hardware and software platforms, common marketing, product management and technical and distribution support to each of the RSOs.

Each RSO’s results reflect the external revenue earned, as well as the Segment Adjusted EBITDA earned (or loss incurred) before the remaining CSO and corporate costs allocations. Segment assets are not disclosed because such information is not reviewed by the CODM.

Revenue

The majority of our revenue is subscription-based. Consequently, growth in subscribers influences our subscription revenue growth. However, other factors, including, but not limited to, the types of new subscribers we add and the timing of entry into subscription contracts also play a significant role. The price and terms of our customer subscription contracts vary based on many factors, including fleet size, hardware options, geographic region and distribution channel. In addition, we derive revenue from the sale of in-vehicle devices, which are used to collect, generate and transmit the data used to enable our SaaS solutions.

Our customer contracts typically have a three-to-five-year initial term. Following the initial term, most fleet customers elect to renew for fixed terms ranging from one to five years. Our third-party dealers are typically billed monthly based on active connections. Some of our customer agreements, including our consumer subscriptions, provide for automatic monthly or yearly renewals unless the customer elects not to renew its subscription. Our consumer customer contracts in South Africa are governed by the Consumer Protection Act, which allows customers to cancel without paying the full balance of the contract amount. Our fleet contracts and our customer contracts outside of South Africa are generally non-cancellable.

Cost of Revenue and Gross Margin

Cost of revenue associated with our subscription revenue consists primarily of costs related to cellular communications, infrastructure hosting, third-party data providers, service contract maintenance costs, commission expense related to third party dealers or distributors (commission is capitalized and amortized, on a straight-line basis, unless the amortization period is 12 months or less) and depreciation of our capitalized installed in-vehicle devices. Cost of sales associated with our hardware revenue includes the cost of the in-vehicle devices, cost of hardware warranty, shipping costs, custom duties, and commission expense related to third-party dealers or distributors. We capitalize the cost of in-vehicle devices utilized to service customers, for customers selecting our bundled option, and we depreciate these costs from the date of installation over their expected useful lives.

We expect that cost of revenue as a percentage of revenue will vary from period to period depending on our revenue mix, including the proportion of our revenue attributable to our subscription-based services. Subscription revenue generates a higher gross profit margin than hardware and other revenue. The majority of the other components of our cost of revenue are variable and are affected by the number of subscribers, the composition of our subscriber base, and the number of new subscriptions sold in the period.

Operating Expenses

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and wages to sales and marketing employees, commissions paid to employees, travel-related expenses, and advertising and promotional costs. We pay our sales employees commissions based on achieving subscription targets and we capitalize commission and amortize it over the expected life of the contract taking account of expected extensions/renewals (unless the amortization period is 12 months or less). Commission capitalized that is attributable to hardware or installation is amortized in full at the time the related hardware, or installation, revenue is recognized. Advertising costs consist primarily of costs for print, radio, television and digital advertising, search engine optimization, promotions, public relations, customer events, tradeshows and sponsorships. We expense advertising costs as incurred. We plan to continue to invest in sales and marketing in order to grow our sales and build brand and category awareness.

Administration and Other Charges

Administration and other charges consist primarily of salaries and wages for administrative staff, travel costs, professional fees (including audit and legal fees), real estate leasing costs, expensed research and development costs and depreciation of fixed assets including vehicles and office equipment and amortization of intangible assets. We expect that administration and other charges will increase in absolute terms as we continue to grow our business.

Research and Development

For additional disclosures in respect of research and development, technology and intellectual property please refer to “Item 1. Business” in our Annual Report on Form 10-K for the year ended March 31, 2023, which we filed with the SEC on June 22, 2023.

Taxes

During the three months ended December 31, 2022 and 2023, our effective tax rates were 7.4% and 34.3%, and during the nine months ended December 31, 2022 and 2023, our effective tax rates were 74.3% and 59.6%, respectively, compared to a South African statutory rate of 27% (2023: 28%). Taxation mainly consists of normal statutory income tax paid or payable and deferred tax on any temporary differences.

Our effective tax rate may vary primarily according to the mix of profits made in various jurisdictions and the impact of certain non-deductible/non-taxable foreign exchange movements, net of tax. Refer to the Non-GAAP Financial Information section for the reconciliation of adjusted effective tax rate. As a result, significant variances in future periods may occur.

Results of Operations

The following table sets forth certain consolidated statements of income data:


	Three Months Ended December 31,						Nine Months Ended December 31,
	2022			2023			2022			2023

	(In thousands)



Total revenue	$	37,807		$	39,085		$	108,128		$	113,198
Total cost of revenue	13,459			15,587			39,945			43,311
Gross profit	24,348			23,498			68,183			69,887
Sales and marketing	4,589			3,537			12,974			10,512
Administration and other	15,728			17,507			47,275			50,052
Income from operations	4,031			2,454			7,934			9,323
Other (expense)/income	(748)			66			859			(234)
Interest income	106			307			994			774
Interest expense	378			604			1,002			1,645
Income tax expense	223			762			6,525			4,900
Net income	2,788			1,461			2,260			3,318

Less: Net income attributable to non-controlling interest	—			—			—			—
Net income attributable to MiX Telematics Limited	$	2,788		$	1,461		$	2,260		$	3,318

The following table sets forth, as a percentage of revenue, consolidated statements of income data:

	Three Months Ended December 31,						Nine Months Ended December 31,
	2022			2023			2022			2023
	(Percentage)
Total revenue	100.0		%	100.0		%	100.0		%	100.0		%
Total cost of revenue	35.6			39.9			36.9			38.3
Gross profit	64.4			60.1			63.1			61.7
Sales and marketing	12.1			9.0			12.0			9.3
Administration and other	41.6			44.8			43.7			44.2
Income from operations	10.7			6.3			7.3			8.2
Other (expense)/income	(2.0)			0.2			0.8			(0.2)
Interest income	0.3			0.8			0.9			0.7
Interest expense	1.0			1.5			0.9			1.5
Income tax expense	0.6			1.9			6.0			4.3
Net income	7.4			3.7			2.1			2.9

Less: Net income attributable to non-controlling interest	—			—			—			—
Net income attributable to MiX Telematics Limited	7.4			3.7			2.1			2.9

Results of Operations for the Three Months Ended December 31, 2022 and 2023

Revenue


	Three Months Ended December 31,
	2022		2023		% Change		% Change at constant currency
	(In thousands, except for percentages)
Subscription revenue	$	32,469	$	33,655	3.7	%	6.4	%
Hardware and other revenue	5,338		5,430		1.7	%	2.1	%
	$	37,807	$	39,085	3.4	%	5.8	%

Our total revenue increased by $1.3 million, or 3.4%, from the third quarter of fiscal year 2023. The principal factors affecting our revenue growth included:

•Subscription revenue increased by 3.7% to $33.7 million, compared to $32.5 million for the third quarter of fiscal year 2023. Subscription revenue represented 86.1% of total revenue during the third quarter of fiscal year 2024. Subscription revenue increased by 6.4% on a constant currency basis, year over year. During the third quarter of fiscal year 2024, our subscriber base grew by a net 52,400 subscribers, or 4.8%, to over 1,142,000 subscribers at December 31, 2023, compared to the net growth of 44,600 subscribers during the third quarter of fiscal year 2023. The growth during the third quarter of fiscal year 2024 was mainly due to the Africa segment.

The majority of our total revenue and subscription revenue are derived from currencies other than the U.S. Dollar. Accordingly, the strengthening of the U.S. Dollar against these currencies (in particular against the South African Rand), has negatively impacted our revenue and subscription revenue reported in U.S. Dollars. Compared to the third quarter of fiscal year 2023, the South African Rand weakened by 6% against the U.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R18.74 in the third quarter of fiscal year 2024 compared to an average of R17.64 during the third quarter of fiscal year 2023. The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the third quarter of fiscal year 2024 led to a 2.7% decrease in reported U.S. Dollar subscription revenue.

•Hardware and other revenue was $5.4 million, an increase of 1.7%, compared to $5.3 million for the third quarter of fiscal year 2023. Hardware and other revenue increased by 2.1% on a constant currency basis, year over year.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the third quarter of fiscal year 2024 led to a 2.4% decrease in reported U.S. Dollar total revenue.

A breakdown of third-party revenue by segment is shown in the table below:


	Three Months Ended December 31,
	2022		2023		2022		2023		2022		2023
	(In thousands)
	Total Revenue				Subscription Revenue				Hardware and Other Revenue
Africa	$	19,489	$	20,920	$	18,029	$	19,408	$	1,460	$	1,512
Americas	6,150		5,623		5,842		5,062		308		561
Europe	3,799		3,382		3,051		3,014		748		368
Middle East and Australasia	6,395		6,679		4,013		4,361		2,382		2,318
Brazil	1,956		2,476		1,516		1,805		440		671
CSO	18		5		18		5		—		—
Total	$	37,807	$	39,085	$	32,469	$	33,655	$	5,338	$	5,430

In the Africa segment, subscription revenue increased by $1.4 million, or 7.6%. On a constant currency basis, the increase in subscription revenue was 13.7%, as a result of a 25.9% increase in subscribers since January 1, 2023. Hardware and other revenue increased by 3.6%. Total revenue increased by $1.4 million, or 7.3%. Total revenue increased by 13.3% on a constant currency basis.

In the Americas segment, subscription revenue decreased by $0.8 million, or 13.4%, as a result of a 14.4% decrease in subscribers since January 1, 2023. Hardware and other revenue increased by $0.3 million or 82.1%. Total revenue decreased by $0.5 million, or 8.6%.

In the Europe segment, subscription revenue decreased by 1.2%. On a constant currency basis, subscription revenue decreased by 5.3%. Subscribers decreased by 5.7% since January 1, 2023. Hardware and other revenue decreased by $0.4 million or 50.8%. Total revenue decreased by $0.4 million, or 11.0%. Total revenue decreased by 14.7% on a constant currency basis.

In the Middle East and Australasia segment, subscription revenue increased by $0.3 million, or 8.7%. On a constant currency basis, subscription revenue increased by 9.1%, as a result of an 11.2% increase in subscribers since January 1, 2023. Hardware and other revenue decreased by $0.1 million, or 2.7%. Total revenue increased by $0.3 million, or 4.4%. Total revenue in constant currency increased by 5.4%.

In the Brazil segment, subscription revenue increased by $0.3 million, or 19.1%. On a constant currency basis, subscription revenue increased by 12.4%. Subscribers increased by 18.2% since January 1, 2023. Hardware and other revenue increased by $0.2 million or 52.5%. Total revenue increased by $0.5 million, or 26.6%. On a constant currency basis, total revenue increased by 19.6%.

Cost of Revenue and Gross Margin


	Three Months Ended December 31,
	2022		2023
	(In thousands, except for percentages)




Cost of revenue - subscription	$	9,864	$	11,942
Cost of revenue - hardware and other	3,595		3,645

Gross profit	$	24,348	$	23,498
Gross profit margin	64.4%		60.1%
Gross profit margin - subscription	69.6%		64.5%
Gross profit margin - hardware and other	32.7%		32.9%

Compared to an increase in total revenue of $1.3 million, or 3.4%, cost of revenue increased by $2.1 million, or 15.8%, from the third quarter of fiscal year 2023. This resulted in a lower gross profit margin of 60.1% in the third quarter of fiscal year 2024 compared to 64.4% in the third quarter of fiscal year 2023.

Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 86.1% of total revenue in the third quarter of fiscal year 2024 compared to 85.9% in the third quarter of fiscal year 2023. The subscription revenue margin during the third quarter of fiscal year 2024 was 64.5%, compared to 69.6% for the third quarter of fiscal year 2023 and declined primarily due to higher in-vehicle device depreciation charged to the Condensed Consolidated Statements of Income in the current quarter.

During the third quarter of fiscal year 2024, hardware and other margins were higher than in the third quarter of fiscal year 2023, mainly due to the geographical sales mix and the distribution channels.

Sales and Marketing


	Three Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)



Sales and marketing	$	4,589		$	3,537
As a percentage of revenue	12.1		%	9.0		%

Sales and marketing costs decreased by $1.1 million, or 22.9%, from the third quarter of fiscal year 2023 to the third quarter of fiscal year 2024 against a 3.4% increase in total revenue. The decrease in the third quarter of fiscal year 2024 was primarily as a result of decreases of $0.7 million in advertising costs and $0.4 million in employee costs.

In the third quarter of fiscal year 2024, sales and marketing costs represented 9.0% of revenue compared to 12.1% of revenue in the third quarter of fiscal year 2023.

Administration and Other Expenses


	Three Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)



Administration and other	$	15,728		$	17,507
As a percentage of revenue	41.6		%	44.8		%

Administration and other expenses increased by $1.8 million, or 11.3%, from the third quarter of fiscal year 2023 to the third quarter of fiscal year 2024.

Administration and other expenses in the third quarter of fiscal year 2024 increased due to $1.2 million in strategic costs related to the Powerfleet Transaction discussed in the Recent Developments section above, $0.3 million in information and technology costs, $0.2 million in travel costs and other increases of $0.1 million, none of which were individually significant.

Taxation


	Three Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)


Income tax expense	$	223		$	762
Effective tax rate	7.4		%	34.3		%

Taxation expense increased by $0.5 million. During the third quarter of fiscal year 2024, net income included a net foreign exchange loss of $0.5 million before tax and a $0.6 million credit from the income tax effect of net foreign exchange losses (which mainly includes a $0.6 million deferred tax credit on a U.S. Dollar intercompany loan between MiX Telematics and MiX Telematics Investments Proprietary Limited (“MiX Investments”), one of our wholly-owned subsidiaries, offset by a deferred tax credit on other foreign exchange losses which are not significant). During the third quarter of fiscal year 2023, net income included a net foreign exchange loss of $0.8 million before tax and a $1.3 million credit from the income tax effect of

net foreign exchange losses (which includes a $1.1 million deferred tax credit on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments and a $0.2 million deferred tax credit on other foreign exchange losses).

Adjusted effective tax rate, a non-GAAP measure which excludes the impact of net foreign exchange losses and gains, restructuring costs, acquisition-related costs, strategic costs, non-recurring transitional service agreement costs and contingent consideration remeasurement, net of tax is the tax rate used in determining adjusted net income. Adjusted effective tax rate was 37.3% in the third quarter of fiscal year 2024 as compared to 39.2% in the third quarter of fiscal year 2023. Refer to the Non-GAAP Financial Information section for the reconciliation of adjusted effective tax rate.

Results of Operations for the Nine Months Ended December 31, 2022 and 2023

Revenue


	Nine Months Ended December 31,
	2022		2023		% Change		% Change at constant currency
	(In thousands, except for percentages)
Subscription revenue	$	94,132	$	98,303	4.4	%	10.6	%
Hardware and other revenue	13,996		14,895		6.4	%	9.8	%
	$	108,128	$	113,198	4.7	%	10.5	%

Our total revenue increased by $5.1 million, or 4.7%, from the first nine months of fiscal year 2023. The principal factors affecting our revenue increase included:

•Subscription revenue increased by 4.4% to $98.3 million, compared to $94.1 million for the first nine months of fiscal year 2023. Subscription revenue represented 86.8% of total revenue during the first nine months of fiscal year 2024. Subscription revenue increased by 10.6% on a constant currency basis, year over year. From March 31, 2023 to December 31, 2023, our subscriber base grew by a net 140,300 subscribers to over 1,142,000 subscribers at December 31, 2023, compared to the net growth of 144,000 subscribers during the first nine months fiscal year 2023, of which 35,800 subscribers were attributable to the FSM Acquisition. The growth during the first nine months of fiscal year 2024 was mainly due to asset tracking and light fleet subscribers in the Africa segment.

The majority of our revenue and subscription revenue are derived from currencies other than the U.S. Dollar. Accordingly, the strengthening of the U.S. Dollar against these currencies (in particular against the South African Rand) following continued currency volatility, has negatively impacted our revenue and subscription revenue reported in U.S. Dollars. Compared to the first nine months of fiscal year 2023, the South African Rand weakened by 11.6% against the U.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R18.68 in the current nine-month period compared to an average of R16.73 during the first nine-months of fiscal year 2023. The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the first nine-months of fiscal year 2024 led to an 6.2% decrease in reported U.S. Dollar subscription revenue.

•Hardware and other revenue increased by $0.9 million, or 6.4%, from the first half of fiscal year 2023. Hardware and other revenues increased by 9.8% on a constant currency basis, year over year.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the first half of fiscal year 2024 led to an 5.8% decrease in reported U.S. Dollar revenue.

A breakdown of third-party revenue by segment is shown in the table below:


	Nine Months Ended December 31,
	2022		2023		2022		2023		2022		2023
	(In thousands)
	Total Revenue				Subscription Revenue				Hardware and Other Revenue
Africa	$	59,708	$	60,603	$	55,163	$	56,606	$	4,545	$	3,997
Americas	15,006		15,789		13,535		14,503		1,471		1,286
Europe	10,962		10,561		9,215		9,184		1,747		1,377
Middle East and Australasia	17,251		19,198		12,095		12,757		5,156		6,441
Brazil	5,142		7,027		4,065		5,237		1,077		1,790
CSO	59		20		59		16		—		4
Total	$	108,128	$	113,198	$	94,132	$	98,303	$	13,996	$	14,895

In the Africa segment, subscription revenue increased by $1.4 million, or 2.6%. On a constant currency basis, the increase in subscription revenue was 13.7%, as a result of a 25.9% increase in subscribers since January 1, 2023. Hardware and other revenue decreased by $0.5 million, or 12.1%. Total revenue increased by $0.9 million or 1.5%. On a constant currency basis, the total revenue increase was 12.5%.

In the Americas segment, subscription revenue increased by $1.0 million, or 7.2%, despite a 14.4% decrease in subscribers since January 1, 2023. The FSM business acquired on September 2, 2022 reported subscription revenue of $5.8 million during the first nine months of fiscal year 2024 compared to $3.2 million in the first nine months of fiscal year 2023. Hardware and other revenue decreased by $0.2 million, or 12.6%. Total revenue increased by $0.8 million, or 5.2%.

In the Europe segment, subscription revenue decreased by 0.3%. On a constant currency basis, the decrease in subscription revenue was 3.9% as a result of a 5.7% decrease in subscribers since January 1, 2023. Total revenue decreased by $0.4 million or 3.7%. Hardware and other revenue decreased by $0.4 million or 21.2%. Total revenue decreased by 7.2% on a constant currency basis.

Subscription revenue in the Middle East and Australasia segment increased by $0.7 million or 5.5%. On a constant currency basis, the increase in subscription revenue was 7.9%, as a result of an 11.2% increase in subscribers since January 1, 2023. Hardware and other revenue increased by $1.3 million, or 24.9%. Total revenue increased by $1.9 million, or 11.3%. Total revenue in constant currency increased by 14.0%.

In the Brazil segment, subscription revenue increased by $1.2 million, or 28.8%. On a constant currency basis, subscription revenue increased by 23.6%. The increase was mainly due to an increase in subscribers of 18.2% since January 1, 2023. Hardware and other revenue increased by $0.7 million, or 66.2%. Total revenue increased by $1.9 million, or 36.7%. On a constant currency basis, total revenue increased by 31.1%.

Cost of Revenue


	Nine Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)




Cost of revenue - subscription	$	29,769		$	33,373
Cost of revenue - hardware and other	10,176			9,938

Gross profit	$	68,183		$	69,887
Gross profit margin	63.1		%	61.7		%
Gross profit margin - subscription	68.4		%	66.1		%
Gross profit margin - hardware and other	27.3		%	33.3		%

Compared to an increase in total revenue of $5.1 million, or 4.7%, cost of revenue increased by $3.4 million, or 8.4%, from the first nine months of fiscal year 2023. This resulted in a lower gross profit margin of 61.7% in the first nine months of fiscal year 2024 compared to 63.1% in the first nine months of fiscal year 2023.

Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 86.8% of total revenue in the first nine months of fiscal year 2024 compared to 87.1% in the first nine months of fiscal year 2023. The subscription revenue margin during the first nine months of fiscal year 2024 was 66.1%, compared to 68.4% for the first nine months of fiscal year 2023, and declined primarily due to higher in-vehicle device depreciation charged to the Condensed Consolidated Statements of Income in the first nine months of fiscal year 2024.

During the first nine months of fiscal year 2024, hardware and other margins were 33.3% compared to 27.3% in the first nine months of fiscal year 2023.

Sales and Marketing


	Nine Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)



Sales and marketing	$	12,974		$	10,512
As a percentage of revenue	12.0		%	9.3		%

Sales and marketing costs decreased by $2.5 million, or 19.0%, from the first nine months of fiscal year 2023 to the first nine months of fiscal year 2024 against a $5.1 million, or 4.7%, increase in total revenue. The decrease in the first nine months of fiscal year 2024 was primarily as a result of decreases of $1.2 million in advertising costs, $1.0 million in employee costs and $0.3 million in travel costs.

In the first nine months of fiscal year 2024, sales and marketing costs represented 9.3% of revenue compared to 12.0% of revenue in the first nine months of fiscal year 2023.

Administration and Other Expenses


	Nine Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)



Administration and other	$	47,275		$	50,052
As a percentage of revenue	43.7		%	44.2		%

Administration and other expenses increased by $2.8 million, or 5.9%, from the first nine months of fiscal year 2023 to the first nine months of fiscal year 2024.

The increase mainly relates to $2.0 million in strategic costs related to the Powerfleet Transaction, discussed in the Recent Developments section above, $0.6 million in information and technology costs and increases of $0.2 million in travel costs.

Taxation


	Nine Months Ended December 31,
	2022			2023
	(In thousands, except for percentages)


Income tax expense	$	6,525		$	4,900
Effective tax rate	74.3		%	59.6		%

Taxation expense decreased by $1.6 million. In the first nine months of fiscal year 2024, the net income included a foreign exchange loss of $1.3 million before tax and a $0.1 million credit from the income tax effect of net foreign exchange losses (which includes a $0.3 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments, as well as a $0.4 million deferred tax credit on other foreign exchange losses). During the first nine months of fiscal year 2023, net income included a net foreign exchange gain of $0.7 million before tax and a $2.8 million charge from the income tax effect of net foreign exchange gains (which includes a $2.6 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments, as well as a $0.2 million deferred tax charge on other foreign exchange gains).

Adjusted effective tax rate, a non-GAAP measure which excludes the impact of net foreign exchange losses and gains, restructuring costs, acquisition-related costs, strategic costs, non-recurring transitional service agreement costs and contingent consideration remeasurement, net of tax is the tax rate used in determining adjusted net income. Adjusted effective tax rate was 45.5% in the first nine months of fiscal year 2024 as compared to 44.1% in the first nine months of fiscal year 2023. Refer to the non-GAAP section below for the reconciliation of adjusted effective tax rate.

Non-GAAP Financial Information

We use certain measures to assess the financial performance of our business. Certain of these measures are termed “non-GAAP measures” because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with GAAP, or are calculated using financial measures that are not calculated in accordance with GAAP. These non-GAAP measures include adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per share, adjusted effective tax rate, free cash flow and constant currency information.

An explanation of the relevance of each of the non-GAAP measures, a reconciliation of the non-GAAP measures to the most directly comparable measures calculated and presented in accordance with GAAP and a discussion of their limitations is set out below. We do not regard these non-GAAP measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with GAAP or those calculated using financial measures that are calculated in accordance with GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and adjusted EBITDA margin are two of the profit measures reviewed by the CODM. We define adjusted EBITDA as net income before income taxes, interest expense, interest income, net foreign exchange losses/gains, depreciation of property, plant and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized internal-use software development costs and intangible assets identified as part of a business combination, stock-based compensation costs, net loss/profit on sale of property, plant and equipment, restructuring costs, acquisition-related costs, strategic costs, non-recurring transitional service agreement costs and the contingent consideration remeasurement. We define adjusted EBITDA margin as adjusted EBITDA divided by total revenue.

We have included adjusted EBITDA and adjusted EBITDA margin in this Quarterly Report on Form 10-Q because they are key measures that our management and board of directors use to understand and evaluate our core operating performance and trends; to prepare and approve its annual budget; and to develop short and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA and adjusted EBITDA margin can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results.

A reconciliation of net income (the most directly comparable financial measure presented in accordance with GAAP) to adjusted EBITDA for the periods shown is presented below.


Reconciliation of Net Income to Adjusted EBITDA for the Period
	Three Months Ended December 31,						Nine Months Ended December 31,
	2022			2023			2022			2023
	(In thousands)

Net income	$	2,788		$	1,461		$	2,260		$	3,318
Plus: Income tax expense	223			762			6,525			4,900
Plus: Interest expense	378			604			1,002			1,645
Less: Interest income	(106)			(307)			(994)			(774)
Plus/(less): Net foreign exchange losses/(gains)	755			493			(743)			1,346
Plus: Depreciation (1)	2,419			3,636			7,216			9,404
Plus: Amortization (2)	1,593			1,618			3,992			4,620

Plus: Stock-based compensation costs	273			262			324			827


Plus/(less): Net loss/(profit) on sale of property, plant and equipment	1			(45)			(32)			(49)

Plus: Restructuring costs	84			—			84			30
Plus: Acquisition-related costs	—			—			784			—
Plus: Strategic costs (3)	—			1,200			—			1,996
Plus: Non-recurring transitional service agreement costs (4)	—			361			—			482
Less: Contingent consideration remeasurement	—			(511)			—			(1,049)
Adjusted EBITDA	$	8,408		$	9,534		$	20,418		$	26,696
Adjusted EBITDA margin	22.2		%	24.4		%	18.9		%	23.6		%

(1) Includes depreciation of owned assets (including in-vehicle devices).

(2) Includes amortization of intangible assets (including capitalized internal-use software development costs and intangible assets identified as part of a business combination).

(3) Strategic costs relate to costs incurred in relation to the Powerfleet Transaction discussed in the “Recent Developments” section above.

(4) Certain non-recurring costs related to the extension of the transitional service agreement in respect of the FSM Acquisition were incurred on a temporary basis from September 2023 to December 2023 and have been excluded from Adjusted EBITDA.

Our use of adjusted EBITDA and adjusted EBITDA margin have limitations as analytical tools and should not be considered as performance measures in isolation from, or as a substitute for, analysis of our results as reported under GAAP.

Some of these limitations are:

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;

•Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;

•other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure; and

•certain of the adjustments (such as restructuring costs, impairment of long-lived assets and others) made in calculating adjusted EBITDA are those that management believes are not representative of our underlying operations and, therefore, are subjective in nature.

Because of these limitations, adjusted EBITDA and adjusted EBITDA margin should be considered alongside other financial performance measures, including income from operations, net income and our other results.

Adjusted Net Income

Adjusted net income is defined as net income excluding net foreign exchange losses/gains, restructuring costs, acquisition-related costs, strategic costs, non-recurring transitional service agreement costs and contingent consideration remeasurement, net of tax.

We have included adjusted net income in this quarterly report because it provides a useful measure for period-to-period comparisons of our core business by excluding net foreign exchange losses/gains, restructuring costs, acquisition-related costs, strategic costs, non-recurring transitional service agreement costs and contingent consideration remeasurement, net of tax and associated tax consequences, from earnings. Accordingly, we believe that adjusted net income provides useful information to investors and others in understanding and evaluating our operating results.


Reconciliation of net income to adjusted net income
	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
	(In thousands)

Net income	$	2,788	$	1,461	$	2,260	$	3,318
Net foreign exchange losses/(gains)	755		493		(743)		1,346

Income tax effect of net foreign exchange (losses)/gains	(1,267)		(644)		2,792		(110)


Restructuring costs	84		—		84		30
Income tax effect of restructuring costs	(18)		—		(18)		(7)
Acquisition-related costs	—		—		784		—
Income tax effect of acquisition-related costs	—		—		(182)		—
Strategic costs (1)	—		1,200		—		1,996
Non-recurring transitional service agreement costs (2)	—		361		—		482
Contingent consideration remeasurement	—		(511)		—		(1,049)

Adjusted net income	$	2,342	$	2,360	$	4,977	$	6,006

(1) Strategic costs relate to costs incurred in relation to the Powerfleet Transaction discussed in the “Recent Developments” section above.

(2) Certain non-recurring costs related to the extension of the transitional service agreement in respect of the FSM Acquisition were incurred on a temporary basis from September 2023 to December 2023 and have been excluded from Adjusted net income.

Basic and Diluted Adjusted Net Income Per Share

Basic and diluted adjusted net income per share is defined as adjusted net income divided by the weighted average number of ordinary shares in issue during the period.

We have included adjusted net income per share in this quarterly report because it provides a useful measure for period-to-period comparisons of our core business by excluding net foreign exchange losses/gains, restructuring costs, acquisition-related costs, strategic costs, non-recurring transitional service agreement costs and contingent consideration remeasurement, net of tax and associated tax consequences, from earnings. Accordingly, we believe that adjusted net income per share provides useful information to investors and others in understanding and evaluating our operating results.


Reconciliation of net income to basic and diluted adjusted net income per ordinary share
	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
	(In thousands)

Net income	$	2,788	$	1,461	$	2,260	$	3,318
Net foreign exchange losses/(gains)	755		493		(743)		1,346

Income tax effect of net foreign exchange (losses)/gains	(1,267)		(644)		2,792		(110)


Restructuring costs	84		—		84		30
Income tax effect of restructuring costs	(18)		—		(18)		(7)
Acquisition-related costs	—		—		784		—
Income tax effect of acquisition-related costs	—		—		(182)		—
Strategic costs (1)	—		1,200		—		1,996
Non-recurring transitional service agreement costs (2)	—		361		—		482
Contingent consideration remeasurement	—		(511)		—		(1,049)

Adjusted net income	$	2,342	$	2,360	$	4,977	$	6,006

Weighted average number of ordinary shares in issue
Basic (’000)	552,865		554,021		552,148		554,086
Adjusted for:
– potentially dilutive effect of stock appreciation rights (3)	2,249		—		2,873		—
– potentially dilutive effect of restricted share units (3)	697		—		1,026		208
Diluted (’000)	555,811		554,021		556,047		554,294




Net income per ordinary share – basic	$	0.005	$	0.003	$	0.004	$	0.006
Effect of net foreign exchange (losses)/gains to net income	0.001		#		(0.001)		0.002
Income tax effect of net foreign exchange (losses)/gains	(0.002)		(0.001)		0.005		#


Restructuring costs	#		—		#		#
Income tax effect of restructuring costs	#		—		#		#
Acquisition-related costs	—		—		0.001		—
Income tax effect of acquisition-related costs	—		—		#		—
Strategic costs (1)	—		0.002		—		0.004
Non-recurring transitional service agreement costs (2)	—		0.001		—		0.001
Contingent consideration remeasurement	—		(0.001)		—		(0.002)

Adjusted net income per ordinary share – basic	$	0.004	$	0.004	$	0.009	$	0.011


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2023		2022		2023
	(In thousands)
Net income per ordinary share – diluted	$	0.005	$	0.003	$	0.004	$	0.006
Effect of net foreign exchange losses/(gains) to net income	0.001		#		(0.001)		0.002
Income tax effect of net foreign exchange (losses)/gains	(0.002)		(0.001)		0.005		#


Restructuring costs	#		—		#		#
Income tax effect of restructuring costs	#		—		#		#
Acquisition-related costs	—		—		0.001		—
Income tax effect of acquisition-related costs	—		—		#		—
Strategic costs (1)	—		0.002		—		0.004
Non-recurring transitional service agreement costs (2)	—		0.001		—		0.001
Contingent consideration remeasurement	—		(0.001)		—		(0.002)

Adjusted net income per ordinary share – diluted	$	0.004	$	0.004	$	0.009	$	0.011
# Amount less than $0.001

MiX Telematics Ltd 10-Q